Abstract:

Since March 2022, the U.S. Federal Reserve has announced seven consecutive interest rate hikes and started the process of shrinking its balance sheet. The fastest rate hike and balance sheet reduction in history, which triggers a chain effect in the global market, are aimed at coping with unabated inflationary pressures. The increase of interest rates and the reduction of the balance sheet have a serious spillover effect on the key areas of China’s manufacturing industry. Due to the contraction of international trade, difficulties in foreign trade of the manufacturing industry are increased. Affected by the commodity price fluctuations, manufacturing cost control becomes more difficult. Affected by the divergence of exchange rate, opportunities and challenges of manufacturing export and investment coexist. We suggest adhering to the basic principle of “self-centered” monetary policy and paying more attention to the trend of international monetary policy. We should reduce the production and operation costs of enterprises, and strengthen the financing support, offer more tax reduction and fee reduction to manufacturing industry. Last, we should rely on international cooperation policy of the manufacturing industry to promote the industry to improve import and export efficiency.

Key words: U.S. interest rate hike and balance sheet reduction, manufacturing industry of China, spillover effect